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Mobile Coupons: Playing Chicken at the Checkout

mattgrover_med Matt Grover , Executive Director, Technology Jan. 26, 2012

“The future is already here — it’s just not evenly distributed.”
— William Gibson

Coupons have long been one of the most reliable tools in the brand marketing toolbox to promote sales—and consumers can’t seem to get enough of them. But the transition from paper to mobile devices has been challenging, and one of the root causes is actually found in the venerable laser scanners that are part of most store checkout systems. These were designed decades ago to read the light pattern reflected from barcodes on printed coupons. But the backlit, reflective polarized glass of smartphones actually makes an on-screen barcode image invisible to most laser scanners. So we need new ways for smartphones to send information to point-of-sale (POS) terminals—crossing what I like to call the “last inch” barrier. This need has given rise to a game of “chicken” being played out right now between smartphones and retailer systems, and it’s going to be very interesting to see who swerves first. Here are a few of the technologies:

•    Optical (POS): If the retailer is willing to swerve first, one very straightforward solution is to add camera-based barcode readers to their checkout systems, enabling them to work with smartphone displays. Retailers like Target, Starbucks and most recently Walgreens have rolled these out to enthusiastic consumer acceptance. While this is great for the retailers who can do this, CPG manufacturers need their coupons to interoperate with dozens of major retailers who may not have this kind of technology yet.
•    Optical (phone): San Francisco startup Mobeam takes the opposite approach, where the smartphone industry swerves first, allowing mobile coupons to work with retailers’ existing laser scanners. They plan to do this by enabling phones to transmit data to the POS terminal using pulses of light that mimic the laser scanner’s reflected beam. This won’t work with any existing smartphones, but Mobeam claims that new models equipped with their technology could roll out as early as this quarter. P&G is already partnering with them to help get this off the ground.
•    Radio: Near field communication (or “NFC”) enables phone-to-POS communication via low-power radio signals. Being driven most visibly by Google with their Google Wallet payment system, NFC requires the addition of new radio technology to both the phone and the POS terminal. There are a handful of NFC-enabled phones on the market already, and Google got a head start on the POS side by partnering with MasterCard PayPass. Although initially targeted at payment solutions, widespread adoption of NFC technology would open plenty of new possibilities for both retailers and manufacturers to provide mobile offers to their consumers.
•    Audio: Another solution that gets phones and stores talking to each other involves the use of audio signals. All phones of course have microphones—and systems can be installed in retail locations to broadcast data to them using ultrasonic audio signals. ShopKick started this off in 2009 and is well-established with several major retailers, offering rewards to consumers through their app as they walk into the store. Naratte, with their Zoosh offering, is another pioneer in this space, and is working on POS solutions among many other possibilities.
•    GPS: Taking advantage of yet another smartphone capability, Placecast offers a geofencing solution called ShopAlerts, where subscribers receive offers via SMS whenever they enter designated geographic areas. This service works with existing smartphones and does not impact the retail environment, but it would need to be integrated with other solution to provide a complete offer and redemption solution.

While it’s not yet clear how these technologies and standards will play out over the next few years, we can be assured that widespread industry changes will be taking place across multiple channels. There’s a lot at stake, with investments needed in new technologies, consumer awareness and adoption, privacy considerations and even environmental impact. But we stand to make huge gains in terms of taking customer loyalty in new directions, improved data and analytics, and in finding new ways to layer great digital experiences into the consumer journey.

So who do you think will swerve first?

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